Thailand will need to ramp up its performance in several areas seen as obstacles to doing business by Japanese corporations in the Kingdom, or else face a decline in investment and even relocations, particularly after the implementation of the Asean Economic Community (AEC) in 2015.

These are the implications of a Japan External Trade Organisation (Jetro) survey, which showed that some Japanese firms are considering the possibility of moving their production bases to Myanmar and Indonesia to maximise the potential of the AEC. This is despite the fact that the corporations demonstrated improved business sentiment in the first half of 2012, following a recovery in domestic sales and exports after the floods disrupted supply chains last year.

The survey, conducted in June and covering 374 corporations, showed that while 49 per cent said there would be no change in production bases after the AEC launched, 29 per cent saw a possibility of new bases in Myanmar and 21 per cent in Indonesia. Of the respondents, 232 corporations are in the manufacturing sector.

They also complained of a lack of human resources. For those in the manufacturing sector, engineers are the most sought after by Japanese corporations (53 per cent), followed by workers (40 per cent) and managers (37 per cent). Those in the non-manufacturing sector face a major shortage of managers (45 per cent), followed by administrative/sales staff (30 per cent) and engineers (28 per cent).

While promotions were one response (55 per cent) to the lack of human resources, many Japanese firms also had to raise pay for all employees (42 per cent), enhance welfare packages (37 per cent) and improve investment efficiency (27 per cent).

After last year's flood, 70 per cent of respondents said business performance improved in the first half, and 83 per cent of firms anticipated before-tax profit in 2012. Despite the floods, 82 per cent say they would continue doing business in their existing premises, while 18 per cent showed the urge to move to the East of Thailand and 15 per cent in the manufacturing sector responded positively to the idea of a "partial transfer to other countries".

What they want most from the Thai government is implementation of a flood-control plan (82 per cent), followed by speedy and accurate information provision in English (57 per cent) and establishment of a reinsurance system (37 per cent). Thirty-five per cent of manufacturers who suffered damages requested early refund of import duties.

Flood risks aside, the firms highlighted lack of human resources as one of the key obstacles in corporate management (44 per cent), trailing labour costs (56 per cent) and intensified competition by competitors (54 per cent).

They also urged the Thai government to ensure development and implementation of Customs-related systems (46 per cent) followed by relaxation of the Foreign Business Act (31 per cent) and improvement of education and human resource development (27 per cent).

In the survey, 65 per cent of respondents witnessed negative impacts from the wage increase in April and lack of labour force, while the rest witnessed no change or positive impacts on profits. To cope with the wage hike, 44 per cent of respondents kept the increase to the minimum level. Forty-eight per cent aimed for improvement in investment efficiency, while 29 per cent restricted new employment.

As the wage would be hiked to 300 baht (US$9) nationwide in 2013, 77 per cent of the respondents expected to see an increase in labour costs against total costs. Sixty-six per cent foresaw a decrease in profit and 13 per cent foresaw an increase in prices. Most of them - 62 per cent - planned a review of their remuneration system and restriction of employment (27 per cent). They also expected an outflow of employees.

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ASEAN ANALYSISThis year in Thailand-what next?AseanAffairs04 January 2011By David Swartzentruber

It is commonplace in
journalism to write two types of articles at the transition point
between the year that has passed and the New Year.
As this writer qualifies as an “old hand” in observing Thailand with a
track record dating back 14 years, it is time take a shot at what may
unfold in Thailand in 2011.

The first issue that can’t
be answered is the health of Thailand’s beloved King Bhumibol, who is
now 83 years old. He is the world's longest reigning monarch, but
elaborate birthday celebrations in December failed to mask concern over
his health.
More